Using the methods of transmission electron microscopy, the authors of this paper show that the lamellar perlite grains, ferrite-perlite grains and structurally free ferrite grains constitute the main morphological components of category DT350 differentially hardened rails. The level of mechanical properties and the quality of steel rails comply with the Russian standard GOST R 51685-2013. The authors looked at the evolution of the carbide phase and the redistribution of carbon atoms in the surface layers of differentially hardened rails (the passed tonnage is 691.8 million tons) at the depth reaching 10 mm along the rail head centre line and the rail web. The authors found two complementary mechanisms of carbide phase transformation taking place in the surface layers when the rails are in operation: (1) cutting mechanism of cementite particles with the following departure in the bulk ferrite grains or plates (in the perlite structure); (2) cutting mechanism of cementite particles followed by their dissolution, transfer of carbon atoms onto dislocations (in Cottrell atmospheres and dislocation nuclei), transfer of carbon atoms by dislocations in the bulk ferrite grains (or plates) with the following repeated formation of nanosized cementite particles. The first mechanism stands for changing linear dimensions and morphology of carbide particles. The elemental composition of cementite does not see any significant changes. And the structural changes in the carbide can follow the second mechanism. The main cause of cementite dissolution is related to the energy of carbon atoms localized in dislocation nuclei and subgrains, which is higher compared with the cementite lattice. The binding energy 'carbon atom-dislocation' is 0.6 eV, and in cementite it can sometimes be 0.4 eV. It was found that the carbon atoms that stayed in the cementite lattice are located on the lattice defects, i.e. dislocations, grain and subgrain boundaries.